An international bidding war is brewing for the UK packaging company DS Smith after a US-based paper producer put forward a £5.7bn takeover proposal, gatecrashing a deal it had agreed with the British rival Mondi.
DS Smith confirmed it was now in talks with International Paper, which is one of the largest paper and pulp companies in the world, over an all-stock offer, which would trump the £5.14bn deal put forward by Mondi earlier this month.
The news could lead to a bidding battle between both companies after Mondi agreed its all-share takeover deal in principle on 7 March.
Shares at DS Smith rose 7.4% in early trading on Wednesday off the back of the proposal from the Tennessee-based papermaker.
Under the terms, DS Smith shareholders would receive 0.1285 shares in International Paper for each share they own in DS Smith. If the proposed deal goes through, DS Smith shareholders will own just over a third (33.8%) of the combined company.
Founded in east London in the 1940s as a box-making business, DS Smith has grown to become a market leader in packaging and paper products, and now operates in 30 different countries and employs more than 30,000 people.
DS Smith said it was continuing discussions with Mondi, based in Weybridge in Surrey, over its offer to create a UK-based packaging company worth more than £10bn.
Previously both companies had said the deal was an exciting opportunity to create a pan-European industry leader in paper-based sustainable packaging solutions.
Commenting on the International Paper offer on Tuesday, DS Smith said: “The board acknowledges the strategic merits and potential for value creation through a combination with International Paper.
“Accordingly, the board is progressing its discussions with International Paper regarding the proposal.”
International Paper said that a combination between both companies would create a truly global leader in sustainable packaging solutions that is well positioned in an attractive and growing market.
It added that it would result in significant value creation for International Paper and DS Smith shareholders.
